Zeev,
Maybe you will take heart in this from The Walker Newsletter:
Best,
Stitch
reprinted for personal use only:
On Friday the market had its lowest close of this correction. In
fact, the DJIA close of 8425 was its lowest close since 2/25/98.
The SP500 close of 1062.75 was its lowest close since 3/9/98. The
DJIA is now down 10.1% from its high less than a month ago. The
SP500 is down 10.7%. And those large cap indexes are quite a bit
healthier than the broad market. The Russell 2000 is down 18.0%
from its highs and trading in the same range as it was in July
1997! The NASDAQ Composite is down 11.7% from its highs. And don't
forget about those beleaguered Dow Transports, down 17.1% since
July 14th.
All in all, not a pretty picture. However, there might be some
light at the end of the tunnel. You will recall that in our last
issue we had very little good to say about the market. The market
internals were all confirming the decline, and even some pretty
extreme oversold conditions were not able to generate any buying
enthusiasm. Well, we are starting to see some bullish divergences
in the market internals. These are the same type of divergences we
saw at the market bottom on 6/15, and when combined with the still
oversold conditions of the market, they have us looking for a
rally soon. However, we will consider this a counter trend (or
bear market) rally.
Well, we have covered quite a bit of ground here, so let's
summarize. The market has been very weak, but there are some
positives. We are starting to see some internals divergences, the
market is oversold, and we have some major support levels below
the market (1054 on the SP500, 8300 on the DJIA). If those levels
do not hold we expect a quick trip to 8170 before the rally
starts. We will consider the rally a counter trend (or bear
market) rally. Bear market rallies tend to be very sharp and very
powerful, but we expect this one to fail, leading to another
series of selloffs.
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